By Bernard Hickey
The stalemate on bank mortgage rates may be ending.
Bank of New Zealand has cut its one year and two year mortgage rates by 4 basis points and 5 basis points respectively to 6.45% and 6.65%.
See all bank mortgage rates here.
This is the first move lower by a major bank since September 3 in a mortgage market where fixed rates have been remarkably steady for months. ANZ, ASB and Kiwibank all cut their fixed mortgage rates in the week of September 3. HSBC cut its six month and 2 year rates on September 24 and the last move by any bank was SBS's cut in its 3 year rate on September 30.
However, BNZ left its lowest 'Total Money' floating rate unchanged at 6.09% and its standard floating rate unchanged at 6.49%.
Borrowers have increasingly been switching to floating rates from fixed rates, given they have generally been lower and many borrowers are increasingly confident of only slow and low increases in the Official Cash Rate.
The percentage of mortgages that are floating rather than fixed hit an 8 year high of 40.3% in September, up from a record low of 12.5% in August 2007. See Gareth Vaughan's article on the trend higher for floating rate use.
The BNZ move follows a blip lower yesterday in wholesale swap rates, upon which fixed mortgage rates are often based. Two year swap rates have bounded from 3.71% to as high as 4.1% on November 5. They closed yesterday at 4.02%. See our interactive chart on swap rates.
However, BNZ's cut is also slightly surprising given one year swap rates have bounced from 3.46% on October 28 to as high as 3.62% on Tuesday. The two year fixed rate has risen even more in recent weeks on market expectations the Reserve Bank may have to increase the Official Cash Rate earlier and faster than originally expected. This followed stronger than expected local jobs figures last week.
However, Reserve Bank Governor Alan Bollard cautioned markets they may be getting ahead of themselves when he said the bank's view on the economy hadn't been changed by the recent data.
The comments pushed the New Zealand dollar and wholesale interest rates slightly lower. See more here.
See our interactive chart below of average bank mortgage rates.
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